By Alan Vey, Founder & Chairman, Aventus
Earlier this week, European Union officials agreed on the Markets in Crypto-Assets (MiCa) framework – a landmark law that provides guidance for crypto asset service providers to operate within Europe.
It’s the first attempt to produce a multi-jurisdictional regulation around one of the most complex, fastest-paced sectors to date – not something to be taken lightly. With 27 member states, this is the most widespread legislation we’ve seen to date. Not only will it help reduce regulatory arbitrage in the region, but it also paves the way on a global scale.
Fair and clear regulations are the key to blockchain’s ongoing success, so such regulation is undoubtedly necessary. To date, a lack of such fair and clear regulations has been one of the biggest barriers to widespread adoption of blockchain technology.
However, given the pace at which blockchain evolves – with new developments on a near hourly basis – there is a delicate, challenging balance to be struck here. Regulators must continue to adapt as the market evolves, finding a way to overcome the traditional challenges of red tape and bureaucracy to ensure that regulations are keeping up with this rapidly-evolving industry.
What’s more, while regulation is key to enabling innovation in any sector, providing participants with the reassurance, safety and stability needed for mainstream adoption, over-regulation (or regulation without a comprehensive understanding of the sector’s needs and workings) will simply stifle innovation and push crypto pioneers outside of the EU and towards less- or better-regulated regions – the exact opposite of what the framework claims it intends to do.
For both of these challenges, the answer lies in working with the sector, rather than against it. A council of crypto experts with which the regulator can consult will provide them invaluable ongoing interaction with the market in real time – ensuring that the regulations stay relevant and, importantly, allow them to stay ahead of the game, pre-empting any potential loopholes that foul players may use to get around the rules.
